Today’s UBS disclosure of expected losses through unauthorised trades does nothing to help the rebuilding of confidence in the funds and asset management industry.
The brief UBS press release states that the loss is still being investigated, but UBS's current estimate of the loss from unauthorised trades is in the range of US$2 billion (€1.4 billion).
UBS warns further that this could lead UBS to report a loss for the third quarter of 2011. This is obviously terrible news for an institution clawing its way back after the damage done to it by toxic assets uncovered during the 2008 financial crisis.
The revelation follows close on the heels of the Société Générale debacle with Jerôme Kerviel and recalls the earlier Leeson affair.
More damaging than anything will be public and governmental reaction: how can this happen at institutions whose core business activity can, apparently, be so easily and damagingly compromised by what appears to be imperfect supervision and control?
‘Should we not expect much better from flagship investment banks?’ they may well ask.
The knock to consumer confidence will go beyond just the banking sector and is likely to reflect on fund management firms for the simple reason that the public tends not to distinguish between different types of financial services businesses.
©2011 funds europe